Hotels are stepping up the incentives they offer guests to book direct with them – and that’s a headache for corporate clients, who don’t know where their travellers are staying. How can you fight back?
The fast-strengthening direct selling power of hotels is a worrying trend in managed travel. It started with major hotel groups such as Marriott announcing customers could have free wi-fi in return for joining their frequent-guest schemes and booking directly on their websites. The move was criticised by travel buyers, including the Institute of Travel Management in the UK. Its members want their travellers to use official booking channels such as travel management companies and corporate online booking tools. “We are disappointed that Marriott has embarked on an anti-corporate initiative,” said ITM chairman Mark Cuschieri. “We recognise the importance of rewarding loyal customers with complimentary services or amenities. For hotels, these people usually come from the business travel community. But when there is an effort to attract business travellers away from approved corporate channels, it becomes a major problem.”
Booking directly is a major problem for two main reasons: travellers may choose suppliers with which their company has no preferred rates, and it also makes tracking travellers harder for both duty of care and policy compliance reasons. There are other compliance issues as well. For example, invoices from hotels for direct bookings usually display the name and address of the traveller, not their employer. That means the invoices cannot be used to reclaim VAT – usually a missed savings opportunity of around 20 per cent of the total price.
The issue has intensified in recent months after hotels introduced discounts of around ten per cent for booking directly through their websites. Buying Business Travel magazine quoted PwC head of UK hotels and venues Samantha van Leeuwen, who said: “The last thing we want is for travellers to be going direct. I don’t know how they are going to recover. It’s all right to offer wi-fi for loyalty programme members but unprofessional to do so for direct booking, especially when we have worked with partners for years to grow compliance.”
Hotels say they are not trying to harm their relationships with corporate clients and that instead they are wooing travellers who have complete freedom of choice in who and how they book. Instead, they claim, their main target is online travel agencies (OTAs), which have gained dominance of hotel distribution. Expedia alone sold 203 million room nights in 269,000 different hotels in 2015. OTAs are a very expensive distribution channel for hotels – commission rates are often in the region of 20 per cent.
As evidence of what they say is their intention to avoid damaging corporate relationships, some hotels have extended their own-website discounts to bookings through global distribution systems. Others haven’t. Another travel manager, quoted in Business Travel News, said: “It confirms my suspicions that [hotel] sales teams are not working close enough with [their loyalty teams] to protect the integrity of the corporate rates offered. I am almost convinced they are trying to take our travelers from our managed programs and push them right into their own ‘Brand.com’. This tactic may seem good right now, but long-term they will hurt themselves as they hurt the relationship between the buyer and supplier.”
It may not be coincidence that conditions for buyers negotiating corporate hotel agreements for 2017 look particularly difficult. Hotel chains are aiming to push up rates significantly. They are also getting tougher on terms and conditions such as cancellations and seem more ready to “no bid” requests for proposal from corporate clients. Strong demand and limited new supply may be one explanation, but could chains also be getting more aggressive because they believe they can attract clients’ travellers direct anyway?
Even if one accepts that hotels are not deliberately luring away their corporate clients’ travellers, their actions have created yet another challenge. Finding the channel offering the best rates for any one booking has become even more complicated.
“We are seeing a monumental change in behaviours and the structure of programmes, and it really concerns me,” said Mary Bastrentaz, managing director of global travel and events at Accenture, in BTN. "We had a one-stop-shop for booking hotels, air, limo. [Our travellers] never thought of going outside the system. But over the years, certainly with the Internet but [also] the onslaught of all the apps and hotel and air campaigns, it has continually chipped away, and now we are in a very fragmented environment.”
The problem has become one of perception, says Søren Schødt, managing director of TravelpoolEurope. “Even when the price is as good, or better, via a corporate channel, people believe they can get a better rate online at supplier.com or an OTA.”
Yet another complication is that OTAs are also introducing loyalty programmes. Hotels.com, for example, offers customers one free room night from a selection of 254,000 properties for every ten they pay for. As a result, not only suppliers but also intermediaries are competing with managed travel programmes for corporate travellers’ hotel bookings. OTAs are also problematic for managed travel. Just one example why: rates are often non-refundable to the customer (even though the OTA is usually able to obtain a refund from the hotel), yet corporate travellers often want to change or cancel their reservations.
The question is how fiercely are corporate clients going to resist? Will they conclude resistance is futile and let travellers book how and where they want? If so, limited control could still be maintained through a city price cap policy. There are also tools which attempt to capture data from bookings made through direct channels. One example is TripLink from Concur, although it is not clear just how many “unofficial” reservations these tools succeed in capturing.
The TravelpoolEurope perspective – Stand up to hotels by thinking smarter
“I believe allowing travellers to start booking suppliers directly should not be tolerated,” says Schødt. “Companies will continue to save more by booking hotels through the managed programme, but they will have more of a fight on their hands than in the past, and must think smarter to keep travellers onside.” Here are some ways to achieve that difficult balance.
